The Mint Grad

Dealing with debt

Photo of man cutting credit cardNo one wants to talk about debt, yet everyone wants to know the secret to getting rid of it. Why? Because debt makes it harder to make important life decisions.

Debt can negatively impact your credit rating making it difficult to buy a home, a car, or even a TV. It can also get in the way of landing a job, as an increasing number of employers are performing credit checks on prospective employees. Debt impacts your career in another way too: without it, you’re free to choose an industry or job you love and not a position you need so that you can afford to repay enormous student loans and credit card bills.

When you factor in college costs, mortgages and other expenses that come with living on your own, debt may seem impossible to avoid.

The good news is that it’s both preventable and curable. The following six strategies can help you avoid, manage and reduce credit card bills and other forms of debt:


Preventative measures

Try a cash-only or mainly-cash lifestyle

Obviously, the easiest way to avoid debt is to never borrow money in the first place. How can you do this? By opting to spend only the cash that you have all or most of the time.

If you have credit cards, this means putting that plastic away for a while and only using cold, hard dollars to get what you want or need.

The upside is that living on cash will help you develop good fiscal habits and financial discipline that can last a lifetime.

Just say no

Another strategy to prevent debt is to be cautious about what loans or forms of credit you accept. Just because you receive a pre-approved credit card offer in the mail doesn’t mean you have to say “Yes” to it.

Likewise, even though it’s relatively quick and easy to get payday loans – as many young adults make the mistake of doing – those high-rate loans can quickly trap you in a costly cycle of debt that you later regret.


Managing debt

Follow the 1-month rule

If you’ve already racked up credit card debt, it’s time to handle that debt wisely. To successfully manage and ultimately lower your debt, use the one-month rule.

Essentially, this means you don’t charge anything you can’t afford to pay off in full in one month’s time. This way, you avoid interest charges that inflate the cost of your purchases, and sidestep the trap of being in debt year after year.

Avoid unnecessary “bling”

Your friends may seem to shop all of the time, drive fancy cars, party and travel frequently, but if you want to manage your debt (and the burden that comes with it) you need to know your lifestyle limits.

Trying to keep up with the Joneses will only make your debt spiral – the exact opposite of your goal to manage debt.


Paying off what you owe

Exceed Minimum Payments

Making minimum payments on your credit card bills and student loans will keep you in debt for years. To reduce debt more efficiently, you must exceed those minimum payments.

A good idea is to try to double or even triple your minimum required payments. If that’s not possible, even paying an extra $25 or $50 a month will help.

Know your options

Finally, it’s always smart to know all your options when you want to slash debt.

Credit counseling agencies can negotiate with your credit card companies, lower your interest rates, and put you in a debt management plan. You may qualify to have certain federal student loans forgiven. Or perhaps you can refinance your auto loan, saving yourself thousands in finance charges and paying off that debt faster.

But you’ll never know until you reach out to your creditors and explore all of the alternatives.

In the end, it’s up to you to prevent, manage and reduce debt. The good news is that the rewards of a debt-free life will make all your efforts extremely worthwhile.